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(Kitco News) - Gold miners need to invest in exploration instead of buybacks and dividends if they have any hope of meeting demand, according to Alastair Still, CEO of GoldMining, a company with gold and gold-copper projects across the Americas.
“The industry as a whole has been really quite poor in being stewards of their future, such that in the rougher times the major operating and producing companies tend to pass on the long-term future of their companies for the benefit of the short-term returns for investors,” Still said. “Most of the major companies have been reducing exploration expenditures and reducing money spent to advance new projects, such that the major companies simply have not been replacing what they've been mining.”
Still spoke with Kitco News reporter Ernest Hoffman at the recent PDAC 2023 mining convention in Toronto, where he said that the resource depletion across the sector will require an influx of new capital committed to exploration.
“The reality is those discoveries don't come quickly, and they don't come cheaply,” he said. “Projects that are in our portfolio which are advanced, with resources on them already, are becoming much more scarce and much more sought after by the majors and the developing and producing companies.”
Still said that even when significant new deposits are discovered, jurisdictional risks can scare off investment and hamper production.
“Some of the deposits that are being found nowadays are in challenging environments, challenging countries geopolitically,” he said. “Our portfolio is in countries solely within the Americas, stable, mining-friendly geopolitical jurisdictions, Canada, the U.S and Brazil among some of the highlights, all areas that have very strong operating and mining histories. Those are the places where our projects can be advanced quicker towards production.”
While Still sees challenges and constraints for the industry, his outlook for gold as an investment is very positive. “I'm a gold bug, I've been interested in gold in the 25-plus years of my career, so I believe in the metal,” he said. “I believe in the fundamentals behind the metal and the pricing for the metal. I think we are certainly in a period of inflation, the Fed is struggling. The fundamentals are always in place for gold in this type of environment. It's a safe haven environment, people see it as a real store of value.”
As for the price outlook, Still believes the market will see the yellow metal maintaining strength in the coming months. “I think we're going to see a ‘2’ in front of the gold price this year more often than we may see a ‘1’ so a $2000 price is certainly not any stretch of the imagination, particularly when we look at some of the peak all-time highs,” he said. “If you inflation-adjust them to today's rates, we've already seen $2000 gold, so it's not unheard of, and I think we'll be there this year.”
He also sees sentiment in the mining sector improving after a sharp pullback in 2022. “We're starting to see some cautious optimism from investors and companies alike,” he said. “Hopefully it’s a sign that what's to come is a brighter future. It's been a little bit of a treacherous path for a while now, but we certainly see clear sights ahead.”
To learn about GoldMining’s recent IPO and for more of Still’s outlook on the gold sector, watch the video above.
